Accounting Basics
What is the Accounting Equation?
Assets = Liabilities + Equity
What does a Cash Receipts Journal record?
Inflows of cash
FIFO stands for what?
First In, First Out
Assets are resources the business ___?
Owns/controls
Who was famously convicted of tax evasion in 1931?
Al Capone
Define a liability.
An obligation/debt the business owes
Give one example of a cash payment.
Paying wages, rent, or suppliers
What happens to unit costs in LIFO?
Recent (higher) costs are recorded first
What must always equal in a balance sheet?
Assets = Liabilities + Equity
What does “Ponzi Scheme” mean?
Paying old investors with new investors’ money
What is equity?
Owner’s claim on assets after liabilities
Which journal records paying suppliers?
Cash Payments Journal
In AVCO, costs are calculated using the ___ average.
Weighted average
List one current liability.
Accounts payable, taxes payable, wages payable
What’s one difference between a Ponzi and Pyramid scheme?
Ponzi = 1 central operator; Pyramid = each recruit must recruit others
What is the purpose of double-entry accounting?
To keep the accounting equation balanced
If a business sells for cash, which journal records it?
Cash Receipts Journal
Which method often gives higher profits when prices rise?
FIFO
Give one example of a non-current asset.
Buildings, vehicles, equipment
What do forensic accountants investigate?
Fraud, money laundering, financial crimes
Why must the accounting equation balance?
Every transaction affects two sides; ensures accuracy
What happens if you forget to record a payment in the journal?
Cash balance will be overstated; books won’t match
Which method best matches inventory to actual flow of goods?
FIFO
What is retained earnings?
Profits kept in the business after expenses and dividends
What are the 3 stages of money laundering?
Placement, Layering, Integration